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Thursday, April 10, 2014

GILD by Association

Biotech stocks have suffered massive losses with the IBB biotech index down 20% over the last 1 ½ months. This followed a sustained bull market with a 300% increase since the US
Housing Bubble bottom. RNAi Therapeutics
stocks could not duck this trend and suffered similar, if not exaggerated
losses: bellwether Alnylam down almost 50% since their $700M Genzyme deal, Arrowhead Resesarch down 40% since their all-time high, and even the most undervalued of them all, Tekmira, down a solid 30% off the pricing of their secondary barely a month ago. Should investors worry?

The causes of the pullback in the biotech market can be
attributed to at least three factors: 1) a general downturn in secular growth stocks
that have done quite well recently; 2) worries that interest rates are on the
upswing and could divert capital flow away from stocks with little or no current earnings; and finally 3) a
sense that society will stop paying for expensive drugs.

Although the era of ‘resource-constrained’ healthcare has
long arrived in Europe, the fact that US lawmakers made an example out of HCV wonderdrug Sovaldi (sofosbuvir) as a wildly overpriced drug, sent
shudders through the biotech investment community. If a $84,000 price tag for a cure of HCV is
deemed too much despite the fact that it will extend life by years for the
average patient and save the healthcare system much more over the long-term in
terms of reduced costs related to liver-related complications…then what about say orphan
drug pricing for which $300-500k per patient every year has not become that
uncommon? To wit, orphan diseases
represent a fertile ground for RNAi Therapeutics as illustrated by
Alnylam’s phase III candidate for TTR amyloidosis, ALN-TTR02.

‘Resource-constraint healthcare systems’ is certainly something
that I occasionally hear here at the European Liver Meeting (EASL) which
celebrates the very Sovaldi and general progress made in treating HCV, yet tries to deal with the problem of
how to get it patients due to cost issues in light of the millions infected and that would be treated today if cost were not an issue.

Interestingly, nobody here criticizes the drug makers for overcharging.
I don’t think this is because they are paying for our lunches, but
because the medical and long-term pharmacoeconomic and quality-of-life benefits of curing HCV are so
obvious. In general, I believe the
Sovaldi issue will be short-lived and accelerate a transition to a value-based reimbursement system with the benefit of
curtailing some of the drug pricing mis-behavior we have seen (you all know
them). However, beyond that, I
expect that we will still be willing to spend much on our health and drug costs accounting for just ~10% of overall healthcare costs, the pharmaceutical
industry should be able to make the case that innovative drugs that make a
solid difference in patients' lives out to be rewarded financially. Remember this when small, innovative biotechnology companies are undercapitalized to the point of becoming financially non-viable yet patients clamoring for new treatments. RNAi Therapeutics was in that precarious position just 2 1/2 years ago and RNAi investors deserve every cent they raked in on the stock market when the sector recovered. Every cent.

If you look at the RNAi Therapeutics pipeline addressing the
roots of and seeking cures for diseases ranging from the severe and orphan like TTR amyloidosis and
solid cancers, to the chronic and debilitating like HBV and alcohol dependence, it will be RNAi companies that will stand first in line to
benefit from the value-based cost model of healthcare. The continued flow of clinical trial data (watch ARC520, TKM-PLK1, ALN-TTR02, and ALN-AT3 this year) should make that obvious and allow RNAi Therapeutics to break out from the biotech
crowd and bounce back. And even if
the monetary policy makers increased interest rates, I don’t think it would be
much in this deflationary environment, and a 1% short-term interest rate should
not divert capital flow all that much.

8 comments:

Its an interesting dilemma will drugs become a 2 tier model where the haves will get access and the have not's wont? Isnt that really what happens today with insurers of the have willing to pay for the care where the under insure simply die. The price issue has to do with the insures unwilling to pay these sum's and as Dirk has stated if the actuarial have their way the cost of the drug is less then the inevitable long term treatment cost they will pay for drug if it saves them a dime down the road.

It's a market of people and they behave much like you did when greed is the predominant human characteristic on display.

Now you post implying that ARWR's 40% decline is uncalled for but look at your own prior utterances:

Dirk Haussecker had a price target for ARWR of $200 by next year which suddenly became "much better if that meant ARWR at $30 and TKMR at $120" (if ARWR $200, TKMR $1000?) after you sold and rolled it into the TKMR laggard. Currently we have your price target of $150 if evidence of immune reactivation shows up in the coming test result, after you loaded up of course.

The truth is it's people like yourself trading who create the volatility (market of people). The reasoning employed to drive it up and down is bogus much of the time just like your claim to have sold ARWR for TKMR because of certain recent results (you sold months before and used any news you could get your hands on much later to justify).

Reality, however, hasn't changed very much. And that is why Dirk Haussecker is back in ARWR loaded and ready for a $150 price target. Which, it must be emphasized, science has told us is the likely outcome ever since the Hep B Foundation and other who's who of the field broke the news on ARC-520 a year ago.

Let this be a lesson for the people who swing wildly according to their trade position, that it is they who are the market and get their own medicine when on the wrong side of the swing.

Arrowhead is projecting half the cost of Sovaldi and not much of a premium over current ineffective treatments, as little as $20K in needy parts of the world.

That is a shockingly low cost to save the liver.

What more than makes up for it is a massive market numbering in the hundreds of million patients pool.

For Dirk Haussecker to have sold ARWR only to spend time pumping TKMR and ebola where a hundred of the poorest of the poor, if that, are affected each year, that should disqualify him from giving investment advice.

And please don't mention TKMR's me-too HBV candidate that hasn't seen the light of day.

So why buy ARWR then, keep your money in TKMR all the way till next year or whenever your supposed superior brew sees the light of day?

Woah don't go slamming Tekmira. Look everyone has their favorite RNAi company, some like ARWR more, some like TKMR, I like RXII the most. The main point is that I on the other hand like to keep it up front and honest. I think all the RNAi companies will do well. While I do like RXII the most I think all RNAi companies will have a bright future. I like to keep it real and be honest, because I'm not gonna sit here and tout that RXII is better than the other RNAi companies. They each provide a good delivery mechanism for RNAi and for treating people with unmet medical needs I hope they all do well in the future.

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